Webster Bank Earnings Up, Driven By Growth In Loans

The parent company of Webster Bank announced a jump in net income driven largely by commercial loans and commercial real-estate loans, but it also saw growth in residential lending.

The Waterbury-based bank announced net income of $40.6 million for the three month period ending June 30, or 44 cents per diluted share, compared with $33.4 million, or 36 cents per diluted share, during the same period a year before.

Webster Financial Corp. CEO James C. Smith said the economic expansion in Southern New England, though modest, is continuing. Webster is seeing the benefit of some economic improvement, he said.

"We're looking at manufacturing growth," Smith said. "We're looking at retail activity looking pretty solid. We're looking at tourism, expecting an increase here in the summer. Commercial real estate activity is on the rise. Housing has stabilized to a large degree."

Smith added that the company's growth is partly due to taking market share from other banks.

Webster saw growth in commercial loans, up to $2.98 billion during the quarter from $2.84 billion during the same period a year before. It also saw growth in commercial real estate, up to $2.55 billion during the quarter from $2.22 billion during the same period a year before.

"Loan originations were 69 percent higher than a year ago and totaled over $1 billion in the quarter," said Jerry Plush, president and chief operating officer of Webster Financial Corp. "We ended the quarter with strong loan pipelines, which should bode well for the balance of the year. Our emphasis on growing transaction accounts continues to pay off as demand and interest-bearing checking deposits now represent almost 40 percent of total deposits. The growth in our loan portfolio, coupled with an increase in lower cost transaction deposits, enabled us to grow net interest income in a challenging interest rate environment."

Residential mortgage lending was up to $3.3 billion for the quarter from $3.13 billion during the same three months in 2011. Consumer loans were down to $2.7 billion for the quarter from $2.8 billion in 2011.

"Fee income of $44.8 million topped our estimate of $43.8 million, adding nearly a penny of positive earnings variance," said analysts Damon DelMonte and Timur Braziler at Keefe, Bruyette & Woods, Inc. "Better fee income was driven by a better corporate finance products revenue and direct investment income, both of which helped offset a $700,000 decline in mortgage banking."

Webster's nonperforming loans declined to $169.2 million — 1.47 percent of all loans — from $178.3 million, or 1.58 percent of all loans, during the first quarter of the year.

"The rate of inflow to nonperforming loans was the lowest it's been since before the great recession," Smith said.

"Inventories of unsold homes, including foreclosures, is declining," Smith added. "That means that there's a better market for foreclosed real estate than before, it's not adding to a glut . . . that's a very healthy sign."

Shares of the bank's stock were trading up 51 cents at $21.95 late Friday morning.